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Loss Aversion in Farmland Price Expectations

Author

Listed:
  • Todd H. Kuethe
  • Brady Brewer
  • Chad Fiechter

Abstract

Farmland price expectations play a critical role in farm investment decisions, yet previous studies suggest that market experts’ expectations are not rational. That is, market experts do not make efficient use of all available information. This article tests the degree to which expectations are consistent with rational expectations, under symmetric and asymmetric loss, based on aggregate expectations from Purdue Farmland Values and Cash Rent Survey between 1979 and 2019. We find robust evidence that farmland market experts are averse to overpredicting farmland price increases. When this asymmetry is considered, farmland market experts are shown to be rational loss minimizers.

Suggested Citation

  • Todd H. Kuethe & Brady Brewer & Chad Fiechter, 2022. "Loss Aversion in Farmland Price Expectations," Land Economics, University of Wisconsin Press, vol. 98(1), pages 98-114.
    • Handle: RePEc:uwp:landec:v:98:y:2022:i:1:p:98-114
    Note: DOI: 10.3368/le.98.1.102020-0158R
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    File URL: http://le.uwpress.org/cgi/reprint/98/1/98
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    Cited by:

    1. B. James Deaton & Chad Lawley, 2022. "A survey of literature examining farmland prices: A Canadian focus," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 95-121, June.

    More about this item

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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